PROBLEM AND PROSPECTS OF DISTRIBUTING SOFT DRINKS PRODUCTS

ABSTRACT

This research set out to evaluate the problem and prospects of distributing soft drinks products in Enugu state. This study is undertaken as a result of difficulty experienced by most beverage firms on how best to expand their niche at the rural areas amidst of deplorable state of roads in our country. The study has as the objective; to ascertain the problem and prospects of distributing soft drinks products in Enugu state. The study employed survey research design. Stratified random sampling technique was used in selecting the three beverage firms: Nigerian Breweries (NBL), Nigerian Bottling Company (NBC), and the 7UP Bottling Company. A sample of 131 respondents was determined using Taro Yamane’s formula from the population of depot managers and retailers representing the respective beverage firms in Enugu. The sources of data for the study were primary data and secondary source. The study revealed that there was unavailability of warehouses in the rural areas of Enugu State for beverage products to a great extent. The study also revealed that the state of roads in the rural areas of Enugu State for beverage delivery trucks was poor to a great extent. The study showed also that the village/market squares can be effective to a great extent as a central collection point for beverage products in rural areas of Enugu State. Moreover, the study revealed that the tricycle transports mode can be effectively used to a great extent for beverage products distribution in the rural areas of Enugu State. They study recommends among other things that the beverage firms should intensify their effort to increase the availability of warehouse in the rural areas to break-even in proximity and transportation cost and safety of products. Also that, the beverage firms should adopt the use of more tricycle transport system to expand their distribution boundaries and functions. It was concluded that with successful implementation of tricycle for effective distribution channel in beverage firms, they are guaranteed of customer satisfaction, causing sustained competitive edge, increased profitability, and effective cost management, increase in information flow, increase in payment flow (expansion) and better commitment among team groups.

CHAPTER ONE

INTRODUCTION

Distribution is concerned with the organizing system of transportation, storage, and communication so that goods and services will be readily available to consumers. Distribution is a very important element of the marketing mix because of the utilities creates for consumers. Distributing creates three types of utility. Time utility is created when distribution channels make products available for sale when the consumer wants to purchase them. Place utility is created when goods and services are available at a government location. Ownership or possession utility is created when the title of the product passes from the producer or intermediary to purchase, possession utility can also result when the transaction in which the title does not pass to the purchase such as in the case of retailer car.

1.1 Background of the Study

Kolter P. (1983:334) describes channels of distribution as the sets of firms and individuals that take title or assist in transferring title to a particular good and service as it moves from the producers to the consumers. Olakunori & Ejionueme (1998:93) say it is the path taken by-products and the title in their onward movement from producers to consumers or industrial uses, they maintain that in moving products from producers to consumers.

Boosting beverage distribution and sales is one of the greatest challenges beverage firms face in Nigeria more especially in the rural areas. These days, numbers of beverages are introduced every year and only handfuls are successful at gaining distribution and getting placed in retail stores in the rural areas. There is no doubt that these products pass through a defined routes to the final consumers in Nigeria. These routes had never been adequately assessed to know how effective the distribution channel for beverage products are in the rural settings. The routes through which these beverage products pass from the producer to the final consumer is known as the distribution channels. A distribution channel is defined as an organized agency and institution which, in combination, perform all the activities required to link producers in order to accomplish marketing task. The institution here refers to the middlemen like wholesalers, distributors, retailers and agents (Nwokoye, 2003).

Specifically, middlemen create place utility by stocking goods where customers are located. They create time utility by staying open long hours so that customers can shop at their convenience. They create quantity utility by making goods available at large quantities to the consumers. They create assortment utility by collecting in one point other goods that consumers may seek on the same shopping trip. They create possession utility by transferring the goods to the consumer in an easy transaction format, namely for a single payment of cash without the need for any billing (Kotler, 2009).

Distribution channels are an important component of an organization marketing mix through which goods flow from the producer to the user. As institution, there are scope and magnitude of channel problems. They may be made unseen both by the way marketing or distribution is defined and by the ways in which distribution programs are developed and carried into effect.

Beverage products by nature are perishable products and firms engaged in the production of alcoholic and non-alcoholic beverage products like the Nigerian breweries, Coca-Cola and Seven-Up bottling companies must give adequate attention to their distribution channels if they want to continue to survive.

Globally speaking, it can rightly be said that beverage industry is probably the most competitive business in the world. In Nigeria, competition is fierce, with each major players employing what it considers appropriate attack or defensive strategies. All of these translate into huge investment in production facilities and distribution. However to be competitively relevant in the market, common sense demand that firms’ distribution channels should be a coordinated series of distribution channel activities. It is against these background that this researcher considers it wise to empirically assess the distribution channels of the Nigerian Brewery, the Coca-Cola and Seven-Up bottling companies that are considered the best beverage producers in the world; to determine the secret of their distribution channels and by extension their marketing successes in virtually every country of the world where they operate. To sound more specific, the problem this research study seeks to tackle is to assess the distribution channels of NB Plc, NBC Plc and the Seven-Up bottling Plc through their intermediaries and to find out effective distribution channel in the rural areas for their beverage products.

Thus, this work is more or less a case study that will look at the wholesalers, the retailers, the warehouses, the inventory control system, the transportation system, and the role congruent of channel members of these firms that lead to effective distribution.

1.2 Statement of the Problem

In taking decisions on the product channels to be used, there is always need to know the channel structure and type of middlemen involved in the beverage distribution. In several situations, firms experience distribution channel conflict, and this challenge emanates where there is unclear channel structure. Channel structure reveals the kind of participant involved in the production, distribution and the ultimate user of the product. It shows the nature of the linkages, connecting the producer, the middleman, and the consumer. Beverage producer can distribute their products through a variety of distribution channels, such as producer to consumers, producer to retailers and to the consumers, producer to wholesaler to retailer and to the consumer or producer to agent to wholesaler and to the ultimate consumer. The distribution channels of beverage products are not only cumbersome but require good planning and effective implementation of the plan, more so when a firm is looking for effective distribution channel in rural areas for beverage products. If the channel alternative that involves producer to consumer is taken, then this will take the form of having sales people knock door-to-door to peddle the product, or it may mean that the producer establishes a network of wholly owned retail outlets. This is regarded as co-operative channel and at times called direct channels. The other channels that involve more than one middleman each are called indirect channels. The producer or the retailer can take over the wholesales functions, the wholesaler disappears and we have situation where the producer sales to the retailer (hence channel conflict). The producer usually employs different channels simultaneously in order to reach different target markets; at times, however for some reasons such as greater market penetration, a number of channels may be used to reach the same target market and the same channels are therefore competing.

Beverage distribution industry in Nigeria is mostly driven by the three-tier system. This involves the producer-wholesaler-retailer, but unfortunately there is no “reverse” shift on this. If a retailer fails to sell his beverage products before it expires, it cannot go back to the wholesaler. Also if the wholesaler does not move the product out of the door, there is no returning to the producer or the brewer, this is as a result of poor inventory control management and the inability to design effective distribution channel in the rural areas for beverage product where a lot of it could be bought and consumed. However, much evidence shows the Nigerian roads are in bad condition for firms using trucks for rural delivery. Beverage manufacturing firms are constantly having problems in taking their products into the rural areas of Nigeria. Truck drivers encounter many problems such as slippery/muddy roads, pot-holes, narrow bridges which often lead to truck accidents and break-down.

Owing to competition, the producers’ eagerness to get their beverage products to the consumers before expiration date and the dwindling revenue from sales, some firms are confronted with the following questions: Can the wholesalers and retailers in their distribution channels be abandoned and other distribution alternatives created and used?

1.3 Objectives of the Study

This study is designed to ascertain the problem and prospects of distributing soft drinks products in Enugu state of Nigeria. The specific objectives include the following:

1. To ascertain the extent of warehouse availability in the rural areas of Enugu State for beverage products.

2. To determine the state of roads in the rural areas for delivery truck safety in Enugu State.

3. To find out the extent the village/rural market squares can be used as a central collection point for beverage products in the rural areas of Enugu State.

4. To assess the extent the tricycle transport mode can be used for beverage products distribution in the rural areas of Enugu State.

1.4 Research Questions

1. To what extent is warehouse available in the rural areas of Enugu State for beverage products?

2. How is the state of roads in the rural areas for delivery truck safety in Enugu State?

3. To what extent can village/rural market squares be used as a central collection point for beverage products in the rural areas of Enugu State?

4. To what extent can tricycle transport mode be used for beverage products distribution in the rural areas of Enugu State?

1.5 Research Hypotheses

The following hypotheses would be tested in the study.

1. There was unavailability of warehouses in the rural areas of Enugu State for beverage products to a great extent.

2. The state of roads in the rural areas of Enugu State for beverage delivery trucks were poor to a great extent.

3. The village/market squares can be effective to a great extent as a central collection point for beverage products in rural areas of Enugu State.

4. The tricycle transports mode can be effectively used to a great extent for beverage products distribution in the rural areas of Enugu State.

1.6 Scope of the Study

This study centers on the problem and prospects of distributing soft drinks products in Enugu state. The study covered the three beverage producers in Nigeria. They are the Nigerian Breweries (NBL), Nigerian Bottling Company (NBC), and the 7UP Bottling Company. The choice of these beverage firms is based on the fact that they are the market leaders in the sales of alcoholic and non alcoholic beverage products in Nigeria and Enugu State in particular. They employ distribution managers (Depot managers), wholesalers and retailers in the distribution of their products. As big firms, they would serve as a true representative sample for the study.

1.7 Significance of the Study

The following groups of people will benefits from the outcome of this study viz:

To Beverage Firms in Nigeria: Distribution channel being an important component of an organization’s overall marketing strategy along with physical distribution, should engage the attention of management if their intention is to make their products available to the final consumer. This study will be of immense importance to the beverage companies studied and the consumers of their product as well. This is because the underlying relevance of this study lies in the fact that distribution channels impacts greatly on the level of consumer service delivered. Thus, this will enable the firms review their distribution channels’ activities in order to identify the problems inherent in distribution channels which impede their efficiency, and find out ways to improve on the standard of each distribution channel’s activities in order to help achieve the desired objective of the companies, and satisfy their numerous customers bearing in mind that consumers are their target market.

To Beverage Consumers in Nigeria: The study will be significant because there will be product accessibility, which will improve consumer service as continuous availability of products are guaranteed, and this will reduce scarcity which always leads to high cost of product; this way, consumers’ patronage are achieved.

To the Academia: The study will add to the body of knowledge in distribution channel, and will serve as reference point to future researchers and students.

1.8 Limitation of the Study

For a study of this nature, the researcher would have wished to cover the entire nation, but constraints in collecting much information and other constraints were met but the researcher was able to manage these constraints, and came up with something wonderful.

1.9 Definition of Terms

Distributors: Throughout this study, distributors are the same with middlemen who regularly supply large stock for resale to the final buyers or to other retailers. Distribution is the actual movement of goods and services from the source of supply to ultimate consumer (Onah and Thomas, 2004).

Channels: The term here means the passage through which goods and services flow from producers to the final consumers. This is a method or system that people use to get goods and services from the producer to the final consumer (Boone and Johnson, 1997).

Distribution Channel: This here means the route a product follows from an original grower, producer, or importer to reaching the last consumer. This is an organized network of agencies and institutions which in combination perform all the activities required to link producers with users and users with producers in order to accomplish the marketing tasks (Boone and Johnson, 1997).

Channel Efficiency: Here it means the ability of the channel to produce the right result. Marketing institutions encourage greater efficiency of buying and selling transaction and contacts in an economy (Onah and Thomas, 2004).

Wholesalers: Here this term means person or companies that carries large quantity of goods and sell to the retailer at a small quantity. They are middlemen who carry out activities involve in selling goods or services to those buying for resale or business use (Onah and Thomas, 2004).

Retailers: Here it is synonymous with carrying small quantity of goods and selling to the final consumer. They are those individuals or firms that carry out activities involve in selling goods and services to the final consumer (Nwokoye, 2004).

Middlemen: This is the same with someone or institution who buys things in order to sell them to someone else. Middlemen are independent business concern that operates as a link between producers and ultimate consumers (Stanton, 1981).

Manufacturer: This here means producers. Entity that makes a good through a process involving raw materials, components, or assemblies, usually on a large scale with different operations divided among different workers (www.CE-Marketing .com)

Channel Members/Participants: Channel members here mean the wholesalers, the retailers. Channel members are independent organization called (intermediaries) that are involve in making the products available for consumption (Kotler, 2004).

Tiered Distribution: Here this means three tier distribution systems that involves the producer-the wholesaler-the retailer 3-tier distribution structure to reach multiple retail outlets

(www.heineken international.com)

Warehouse: The term is used here as the storage of goods or products prior to use or sell.

Every company has to store its goods while they wait to be sold (Kotler, 2004).

Inventory: Inventory here means the quantity of goods or products stored or all the record of goods in a shop (www.longman.com/dictionaries).

Transportation: Transportation here means both boxed truck and open truck used for transportation of goods. Transportation firms consist of railroads, truckers, airlines, barges and other freight-handling companies that move goods from one location to another (Kotler, 2004).

Beverage Firms in Nigeria

Many beverage firms operate in Nigeria as listed in the Registry of Companies. They are: Seven-Up Bottling Company Plc, it is an Independent manufacturer and distributor of soft drinks; brands include Pepsi, 7up, Mirinda, Teen and Mountain Dew.

Nestle Nigeria Plc. Nestle Nigeria Plc is a member of a health and wellness company renowned worldwide for its high quality products .e.g cereals baby food seasoning and beverages.

Nigerian Breweries. It is one of the largest brewing company in Nigeria. The company specializes in the production of alcoholic and non-alcoholic beverages.

Cadbury Nigeria Limited. This company is a major player in the global confectionary and beverage markets.

Nigerian Bottling Company Plc. Nigerian Bottling Company Plc is the manufacturer and distributor of Coca-cola and Fanta soft drinks. Nigerian Bottling Company is known worldwide as one of the soft drinks in the field of beverages.

Premier Breweries Ltd. This is one of the brewing company in Nigeria.

Guinness Nigerian Limited. This company is a subsidiary of Diageo Plc with brewery in Ikeja, Lagos which was the first outside Ireland and Great Britain.

Spring Water Ltd. Bottler of Swan Natural Spring Waters.

Sona Breweries Plc. This company is manufacturing and marketing non-alcoholic beverages in Nigeria.

Ragolis Waters Limited. This company specializes in the packaging and sales of Spring Water (bottled) then last but not the list.

The Nigerian Distillers Limited. This company manufactures and market wine and sprits in Nigeria.

REFERENCES

Baker, M. (1999) International Encyclopedia of Marketing, England Berkshire: Thomson Business Press.

Boone and Johnson (1997) Marketing Channels, Oklahoma, USA: Petroleum Publishers Limited.

Ehikwe, A. E. (2002) Transportation and Distribution Management, Enugu: Precision Publishers Ltd.

Kotler, P. (2004) Marketing Management, United Kingdom: Pearson Prentice Hall.

Nwokoye, N. (2004) Modern Marketing for Nigeria; Principles and Practice, Onitsha: Africana-FEP Publisher Ltd.

Onah, J. O. and Thomas, M. J. (2004) Marketing Management: Strategies and Cases, Enugu: Institute for Development Studies UNEC.

Stanton, J. W. (1981) Fundamentals of Marketing, New York: McGraw Hills Book Co.

Www.nbc plc.com 3^rd August 2012.

www.CE-Marketing .com